How CACI aligns with the Pentagon's change in software direction
A CACI building in Northern Virginia. Gettyimages.com / Krblokhin
By
Ross Wilkers
In talking with Wall Street, CACI International CEO John Mengucci breaks down how the company sees opportunities in the Defense Department's push for agile software acquisition.
Software has shaped CACI International’s long-term vision and strategy since it began in the early 2010s to move away from being a predominantly service-oriented company.
Which means CACI has a keen eye on Defense Secretary Pete Hegseth’s “Directing Modern Software Acquisition to Maximize Lethality” memo sent March 6 to change how the Pentagon buys software.
Hegseth directed Other Transaction Authority and Commercial Solutions Opening procurements, two examples of methods not governed by traditional Federal Acquisition Regulations to become the default mechanism for buying defense software.
During CACI’s fiscal third quarter earnings call with investors Thursday, chief executive John Menugcci said that memo and other related executive orders fit into a theme of being “really focused on greater spending efficiency for the U.S. government and especially in national security space.”
Mengucci told analysts that the memo represents DOD’s “pivot from a long-term program, hardware focus to a software-defined approach, and that’s right in line with agile software development.”
Given CACI’s addition of more product content during its own pivot, will DOD’s effort to change direction on the software front alter how CACI works with providers of hardware?
Mengucci said to think of hardware as in two different pieces, one in the larger form and a second at the component level. The Switchblade product CACI added through its $1.2 billion acquisition of Azure Summit Technology is one example of the latter category.
“You’ve got to have memory and processing power, to put the software to look in the EW (electronic warfare) world,” Mengucci said. “In the optical communications terminal area, a lot of that is software-based, there's some hardware in there. But at the end of the day, we're a merchant supplier to a lot of fantastic companies that are doing the actual larger platform-based work, and they do it extremely well.”
For CACI’s Spectral EW program with the Navy, many of those large-scale hardware providers are on the team that works to upgrade shipboard signals intelligence and information systems.
As Mengucci pointed out “the enemy gets to vote as well” on the technology terms of engagement and that vote is making quick changes to tactics and procedures. Those modifications simply happen quicker and at a more global scale when they happen with software.
“It’s not that we all enjoy or are willing to pick one over the other, we just believe because we're in the electronic world, where you met enemies first, it’s just that software is the only thing out there that can change,” Mengucci said.
Fiscal third quarter revenue of $2.2 billion was up 11.7% over the prior year period, while profit of $253.5 million represented a 16.3% year-over-year increase in EBITDA (earnings before interest, taxes, depreciation and amortization).
CACI lifted the low end of its full-year sales guidance to $8.55 billion with the top end left at $8.65 billion. EBITDA margin expectations remain as in the low 11 % range.